Mortgage Rates Rides the Roller Coaster

Mortgage rates rode the roller coaster today as they were slightly lower this morning, but moved higher in the afternoon.  Despite some economic reports in the morning, bond markets were quiet.  As market conditions deteriorated in the afternoon, the most prevalently quoted conforming 30yr fixed rate for best-case scenarios remains 4.25%.

No movement again in the stock and bond markets. The 10yr is confined to its 8x10 cell between 2.58% and 2.66%. There is a huge cacophony about the DJIA and will it move above 17K.  A nice round number and investors are comfortable with benchmarks in round numbers, but other than that 17K has little meaning. Stocks are still about to decline as we have mentioned for two months, we also added we don’t know when given the artificial stimulus from the Fed and other global central bankers…. (to keep it in perspective, my wife and I are still 100% vested in stocks). The new inflation discussions are meeting with mixed thoughts for stock investors. If inflation accelerates, as an increasing number of lemmings are now believing; stocks may rally on a better economic outlook  -or decline—as interest rates increase. In the short term, the uncertainty is keeping US financial markets tied into lazy tight ranges. One analyst on CNBC made her view real simple, traders are in the Hamptons vacations; she watches too much TV.

When markets are awash with uncertainty as they are now, we call it balance. About as many bulls as bears, neither seeing any reason to act until the next lemming moves. Lemmings are asleep now. When the bell rings, one thing you take to the bank is, the direction of the movement will likely be swift in the first few days of a breakout, whether stocks or bonds, or both; lemmings tend to stampede once aroused. Markets talking a lot about Iraq and increasing numbers of hedge funds reportedly increasing their long oil positions.  As for Ukraine, it is old news for markets now; confined between Russia and Ukraine with the EU pushing for progress in settling it.

Tomorrow more key housing data as well as the Treasury will auction $30B of 2 yr notes, usually not a focus for mortgages and long dated treasuries.

In summary, traders may have started the 4th of July holiday early this year for the markets were about as flat as could be today. Tomorrow does begin the first round of Treasury auctions for the week so that may bring some excitement. Floating into tomorrow appears to be a safe option.